Executive summary
Greenhunter Energy is one of the leading companies in alternative energy in the US. With so many plants throughout the US, Greenhunter Energy has used its position to branch out into 21 states. The company also has big plans for the future, setting the goal of expanding different locations worldwide. Greenhunter Energy also continues to invest in alternative energy to expand its services into new customer segments.
After doing extensive financial and non-financial analysis on Greenhunter Energy, I have gathered important information and recommendations for current shareholders and potential investors. This paper begins with an overview of the company followed by operating performance and SWOT analysis. This paper concludes with my recommendation, based on my findings.
Company description
Greenhunter Energy inc. is one of the largest alternative energy company in the US with its headquarters in the US.The company has plants in the 21 states and sales energy and fuel equivalent to $ 5 Million in a year in this states. The company has been in this business for over 20 years and millions of Americans are using their products and services. The company went on to become a limited public company in the year 2006 after a merger and was listed on New York stock exchange and since then the stock has traded on the floor with mixed trend in the value. This may be as a result of the current world crisis which started as subprime crisis in the year 2007 (Greenhunter energy, 2008).
The company offers different types of energy which include Biodiesel, wind, energy, biomass, geothermal, solar, methanol distillation and glycerine distillation. Recently the company posted operating losses in its financial statements which became a great concern to all stakeholders especially this period of economic recession (Ittner, & Larcker, 2003, p.8).
Operating performance
The company has had sales revenue of $ 5 million in the year 2008 and $ 1 million in the year 2007.This resulted into a loss of $ 15,559,000 and profit of $ 746,000 for the years 2008 and 2007 respectively. The 2008 loss was as a result of increase in the cost of revenue. The increase in the cost of revenue was as a result of economic turmoil which is expected to last for 3 years. The company had a poor cash flow position for the year 2008 causing a cash outflow of $ 18,074,000 and $ 18,686,000 as a cash inflow in the year 2007. This is very worrying to the stakeholders of the company although its influenced by the economic crisis in the world today (Yahoo! Finance, 2009).
However the company has performed better than its peers and expectations of various securities companies but the operating loss and the company’s inability to generate liquidity may lead to the company failing on various covenants. Furthermore, the debt ridden capital structure and possible equity dilution due to recapitalization impose a negative outlook of the company in the coming months(Greenhunter energy, 2008).
Competition
Competitors of this company include, Southern company, FPL group inc, Duke energy corporation, Dominion Resources inc, Centrails electricas Brasileiras S.A, Entergy Corp, American electric power company, Progress energy corporation, Dynegy inc and Portland general electric industry just to mention a but a few. This companies provide stiff completion to Greenhunter energy (Yahoo! Finance, 2009)..
SWOT Analysis
Greenhunter Energy Inc has certain weaknesses and strengths which could be highlighted as follows:
- Strengths:-The Company manages to keep low cost of distribution by cutting down unnecessary expenses. Due to the introduction of technology, the cost will be enormously decreased making it affordable on customer’s pocket. Certain litigation against the company is near its settlement where the company is in favorable position.
- Weaknesses:-The Company has incurred operating losses which have depleted shareholders equity. The leverage position of the company remains. The breach of a bond covenant could lead to decline in the company’s short term liquidity.
- Opportunities: – Greenhunter energy Inc. currently operates in 21 states only and can expand its operations to others states too. New national and international markets offer greater potentials and opportunities to this company. The development of technology provides further innovations and openings to be availed successfully increasing its customer base (Greenhunter energy, 2008)..
- Threats and Trends:- The fluctuating oil costs are an equal threat to the Greenhunter energy Inc as it is to other competitors in the market. The biofuels is no more the exclusive specialty of Greenhunter energy Inc with other competitors providing a tough competition especially with Greenhunter energy Inc’s reluctance towards advertising.
Recommendation
In this regard, the following strategic recommendations will help the company increase shareholder value by streamlining costs and improving profitability (Greenhunter energy, 2008):
- Decreasing cost of doing business by lowering cost of revenues. The purchase department is the most important in this company because without the right raw materials getting to the customers at the right time, the company is not going to be profitable. This department is in charge with finding, soliciting, selecting, and developing products for use in energy production and distribution.
- Promote green practices. The trend among American companies is the adoption of best practices or green practices, which are environment-friendly. Not only are these practices good for the environment but they are positive to the company’s bottom line as proven by many companies. Greenhunter Energy Inc. is already adopted some measures to improve its profitability through its green effort. There are several ways of making an operation environment-friendly while lowering operating costs at the same time.
As time continues to pass and competition tightens between companies competing for the same markets, Greenhunter Energy Inc. is going strong since they are dealing with products that are renewable.
Work cited
Greenhunter energy copyright 2008.
Ittner, C.D. & Larcker, D.F. (2003). Coming up Short on Non-financial Performance Measurement. Harvard Business Review. November, 1-15.
Thompson, A., Strickland, A.J. & Gamble, J. (2008). Crafting and Executing Strategy: The Quest for Competitive Advantage: Concepts and Cases (14th ed.). McGraw-Hill.
Yahoo! Finance, (2009). “Greenhunter energy.” Yahoo! Finance Company Profile, 2009. Web.